A nerdy economics essay recently went viral. It has been claimed that the federal poverty limit rule is completely outdated and that the income required today for a family of four to function in American society is $140,000.
The essay by Michael Green, a financial markets strategist, touched a nerve and sparked another round of affordability debate, this time focused on the question of whether people making six-figure incomes should feel financially strapped.
Economists ridiculed the essay. They pointed out that the typical middle-class family today is actually much richer than its counterpart in the 1960s, when poverty measurement was introduced. And they added that most Americans eat out, have smartphones and fly, which were unimaginable luxuries generations ago.
President Trump has tried to dismiss the issue of affordability, saying in a speech last week that it was “a hoax” and that “you don't need 37 dolls for your daughter.” He returned to the issue on Wednesday, defending his record and claiming that prices for gasoline and medicine had fallen.
But in interviews with Americans in their 20s and 30s, they said the sheer numbers didn't come close to reflecting the reality of their lives. They were all part of what economists call the middle class, and some earned well over $63,360, the median for full-time, year-round workers.
They knew they weren't poor. They could afford to buy eggs. But they are struggling with an economy that has become increasingly unequal in recent decades.
They described feeling that the basics of middle-class life—owning a home, caring for children, eating out occasionally—seemed unattainable or required uncomfortable compromises. Is it worth sacrificing an annual vacation to save for a down payment when property prices keep rising? How about buying a home that's 90 minutes from work – or a two-bedroom home for a family of four? Are children even possible?
For many, the answer to these questions was a resounding “no.” Whether realistic or foolhardy, their views seemed to reflect a quiet abandonment of a long-held American expectation: that through hard work and responsible actions, people can achieve lives significantly better than those of their parents.
“Upward mobility is dead, so to speak,” said Gray Thurston, 27, an electrical engineer in Philadelphia who makes about $90,000 a year. His parents are baby boomers. “My parents' generation did great. Everyone I work with at this age has large retirement accounts, vacations and owns multiple homes. Good for them.”
But things should get better with every generation, he said. “And it feels fundamentally broken that they’re not.”
Expectations versus reality
Essentially, this is an argument about the dimensions of need. The poverty line is a measure of deprivation – do you have enough to eat?
But in his Substack essay, Mr. Green said that $140,000 represented “the price of participation” — how much it costs to build a civic life in America today.
This price has been the subject of public debate for centuries. The 18th-century economist Adam Smith drew the line at appearing in public without shame, said David Brady, who teaches public policy at the University of Southern California. In Smith's Scotland that meant you could buy a linen shirt.
“We need water, food and shelter,” said Dr. Brady. “But beyond that? It is impossible, given the societies in which we live, to have a coherent definition of needs that does not reflect our culture, our values, our norms, our expectations.”
In other words, what is considered necessary is relative.
For Americans, the price of ownership is often measured by the cost of a home. And even with two incomes, many respondents said home ownership has become more distant, especially in urban areas where most Americans now live.
In 1991, the typical first-time home buyer was 28 years old. According to the National Association of Realtors, that buyer was 40 years old this year.
Eric Fuqua, 25, a civil engineer who makes $86,000 a year, said he's known for some time that he couldn't afford a house in the Atlanta neighborhood where he grew up and where his parents still live. He had pinned his hopes on a small condominium.
But rising prices and high mortgage rates mean people have to settle for a location far from the city center, adding up to 90 minutes each way to their commute, he said.
He doesn't want to live like that. So he keeps renting and makes a little money by visiting friends in other cities.
“There is a sense of futility at this point,” he said. “I'm not going to go through the trouble of saving for five years for a house I'll never be able to afford, so why not live my life the way I want?”
This financial pessimism is felt on a massive scale. In a study published last month, economists at the University of Chicago found that young adults with little prospect of buying a home are disproportionately more likely to spend money on leisure activities or risky investments like cryptocurrencies. Those who own their own home or have better chances of owning their own home take fewer risks and are more productive in their careers.
Almost all of the homeowners surveyed received financial help. Jesse Iverson, 28, an energy researcher, and Macy Mack, a graphic designer, bought a home in East Grand Forks, Minnesota, last fall. They relied on a loan backed by the Department of Veterans Affairs, which meant there was no down payment. (He signed up to finance his studies.)
Geography was important. Mr. Iverson said he was also offered a job in upstate New York, but because real estate prices there were significantly higher, he chose Minnesota.
“Is that theoretically possible?” He said about buying a house. “Yes, and I'm proof of that. But I don't think the barrier to entry should be joining the military, having to work full-time while in college, and getting a loan from the VA.”
It's not just about housing. Adults under 35 are no longer building wealth as quickly as they once did, said Edward N. Wolff, an economics professor at New York University. This is in stark contrast to the baby boomers, who are gaining an ever-increasing share of the country's wealth.
Keyana Fedrick, a full-time manager at a department store in northeastern Pennsylvania, said she and her friends felt stuck in jobs where the pay wasn't enough to rent an apartment, let alone buy a house.
She lives with her parents and said she has paid off her student loans. But she still feels like she's waiting for her life to begin.
“I’m 36 and don’t have any children yet,” she said. “I should have a busy life by now. I should travel. I should have a luxurious wardrobe. But instead all I have is good credit and a paid-off 2013 Nissan.”
Ms. Fedrick sees a stark contrast between her generation and that of her parents. Both worked hard, as teachers and bus drivers, and retired with pensions.
“I don’t know if I’ll ever be able to retire,” she said, adding: “Boomers are making out like bandits.”
But what about the children?
Economists point out that people with limited budgets have always managed to successfully raise their children.
But many respondents were hesitant. They want to give their children – and themselves – a better life.
Mr. Iverson, of Minnesota, said he remembered his fear as a child when his family couldn't buy gas for the car.
Being poor “led to a whole lot of struggles and a lot of stress and some really bad memories for me,” he said. “That really influenced me about what I should accept when bringing another person into this world.”
Mr. Thurston, of Philadelphia, said he wanted children. But at the moment he and his partner have to climb three floors to their rental apartment. Your car is a two-door “death trap.”
His salary, about $90,000, would have to cover student loans and child care. He also wants to live in a good school district and pay for extras like music lessons and sports leagues.
“I know you don’t need these things,” he said, “but as a parent, it’s my job to set my child up for success.”
Even for homeowners, the thought of children can be frightening. Stephen Vincent, 30, and his partner Brittany Robenault, a lab technician, initially attended community college to save money. Then, he said, they “ate beans and rice” for several years to save for a down payment.
He is now an analyst for a chemical company and has a household income of about $150,000. He likes his lifestyle in Hamburg, Pennsylvania and wants to maintain it.
“We live in the richest country in the history of human civilization, so why can’t I eat out twice a week and have kids?” he said.
To the skeptics who say these compromises are just lifestyle choices, there was a rejoinder: Hey, give it a try.
“From a place of wealth and privilege, it's very easy to say, 'You should settle for something more modest,'” Mr. Thurston said.
But, he said, “it would kind of suck to live like that.”
Alicia Wrigley struggles with compromise. Ms. Wrigley and her husband, Richard Gailey, both musicians and teachers, own a two-bedroom bungalow in Salt Lake City and are glad to have it — they say they can't afford it now. But juggling music lessons at home with the needs of your two-year-old can feel like a burden. You want another child, but you're wondering how it's all going to work.
“I know it’s possible,” she said, looking out the window at her neighbor’s house, which is exactly the same size.
This neighbor raised six children there in the 1970s. One way for mothers to cope, Ms. Wrigley said, is to “leave their children outside all day and just run them around the neighborhood.”
She said she wouldn't do that today, not least because someone might report her.
“The world,” she said, “is fundamentally different now.”